Loan given by one company to another company

the provision of section 372A would become applicable & the public co would have to comly with the provision of the said section as the loan is being made by the public co & not the private co.  If the case would have been the reverse one then the provision of the said section would not have been applicable. 

the provisions fo teh section are given as follows

372A. Inter-corporate loans and investments.—(1) No company shall,

directly or indirectly,—

(a) make any loan to any other body corporate;

(b) give any guarantee, or provide security, in connection with a loan made

by any other person to, or to any other person, by any body corporate;

and

(c) acquire, by way of subscripttion, purchase or otherwise the securities of

any other body corporate,

exceeding sixty per cent of its paid-up share capital and free reserves, or hundred

per cent of its free reserves, whichever is more:

Provided that where the aggregate of the loans and investments so far made,

the amounts for which guarantee or security so far provided to or in all other

bodies corporate, along with the investment, loan, guarantee or security proposed

to be made or given by the Board, exceeds the aforesaid limits, no investment or

loan shall be made or guarantee shall be given or security shall be provided

unless previously authorised by a special resolution passed in a general meeting:

Provided further that the Board may give guarantee, without being previously

authorised by a special resolution, if,—

(a) a resolution is passed in the meeting of the Board authorising to give

guarantee in accordance with the provisions of this section;

(b) there exists exceptional circumstances which prevent the company from

obtaining previous authorisation by a special resolution passed in a

general meeting for giving a guarantee; and

(c) the resolution of the Board under clause (a) is confirmed within twelve

months, in a general meeting of the company or the annual general

meeting held immediately after passing of the Board's resolution,

whichever is earlier:

Provided also that the notice of such resolution shall indicate clearly the

specific limits, the particulars of the body corporate in which the investment is

proposed to be made or loan or security or guarantee to be given, the purpose of

the investment, loan or security or guarantee, specific sources of funding and

such other details.

(2) No loan or investment shall be made or guarantee or security given by the

company unless the resolution sanctioning it is passed at a meeting of the Board

with the consent of all the directors present at the meeting and the prior approval

of the public financial institution referred to in section 4A, where any term loan

is subsisting, is obtained:

Provided that prior approval of a public financial institution shall not be

required where the aggregate of the loans and investments so far made, the

amounts for which guarantee or security so far provided to or in all other bodies

corporate, alongwith the investments, loans, guarantee or security proposed to be

made or given does not exceed the limit of sixty per cent specified in sub-section

(1), if there is no default in repayment of loan instalments or payment of interest

thereon as per the terms and conditions of such loan to the public financial

institution.

(3) No loan to any body corporate shall be made at a rate of interest lower

than the prevailing bank rate, being the standard rate made public under section

49 of the Reserve Bank of India Act, 1934 (2 of 1934).

(4) No company, which has defaulted in complying with the provision of

section 58A, shall, directly or indirectly,—

(a) make any loan to any body corporate;

(b) give any guarantee, or provide security, in connection with a loan made

by any other person to, or to any other person by, any body corporate;

and

(c) acquire, by way of subscripttion, purchase or otherwise the securities of

any other body corporate,

till such default is subsisting.